Municipal bond issuance fell year-over-year for the second consecutive month as provide in September confronted interrupted issuance from holiday-shortened and Federal Reserve assembly weeks, macroeconomic headwinds and a strong summer time issuance interval.
September quantity was $44.595 billion, a ten.5% lower from $49.839 billion final 12 months. It was down
Issuance year-to-date is $433.422 billion, up 11.8% from $387.847 billion over the identical interval in 2024.
A part of the drop from August stems from two weeks that occur each September: the Labor Day vacation initially of the month and the Federal Open Market Committee assembly mid-month.
These have been lighter weeks the place some issuance was “knocked” out, mentioned Chris Eustance, a portfolio supervisor at Morgan Stanley Funding Administration.
Whenever you get “stay FOMC conferences,” the place the Fed is predicted to chop, a few of the issuers will pull again except they should come to the market, he mentioned.
Moreover, the readout of the Fed minutes as to what the market could anticipate in October could have led to the autumn in issuance, together with the heavy issuance in the summertime months, because the narratives from the “Liberation Day: tariffs and the One Huge Stunning Invoice Act performed out, mentioned Mohammed Murad, head of municipal credit score analysis at PTAM.
Provide is predicted to rebound in October, when BofA Securities estimates that issuance will attain $58 billion.
And whereas issuance is mild this week — probably resulting from final week’s market weak point — there may very well be a “surge of offers put into the market with minimal advance discover because the ahead calendar has quite a few massive offers which might be anticipated to return to market in October or earlier than the tip of the 12 months,” mentioned Pat Luby, head of municipal technique at CreditSights.
Even with a down month, issuers’ want for bond financing exists, as seen in a macro atmosphere “congested” with financial and coverage points, Murad mentioned.
This “could also be additive to the price of issues for issuers … akin to inflation and tariff results which proceed to work their means into the financial system as seen by the rising prices of capital initiatives requiring extra bonds to finish them, and state governments pondering of future budgets that may soften the roughly $911 billion influence from federal Medicaid cuts on healthcare services,” he mentioned.
Whereas issuance dropped in September and could also be slowing within the fourth quarter, 2025 is about to be one other file 12 months, with issuance falling someplace within the preliminary vary of issuance forecasts: between $525 billion to $600 billion, Paul Creedon, managing director and head of nationwide infrastructure at Janney, mentioned throughout a panel dialogue at The Bond Purchaser’s Infrastructure convention in Boston earlier this week.
That is associated to the surge in issuance throughout most sectors, excluding mass transit; the rise in mega offers; and issues concerning the potential elimination of the tax exemption that drove issuance initially of the 12 months earlier than the exemption survived the congressional reconciliation course of, he mentioned.
Moreover, there was “a few of the volatility from the assertive, speedy actions of the [Trump] administration upon entering into workplace,” so some market individuals determined it was an excellent time to lock of their venture, particularly if it had some type of federal funding element, Creedon mentioned.
“There have been a whole lot of drivers, perhaps not those we thought final 12 months … but it surely actually has been a unprecedented 12 months,” he famous.
September particulars
Tax-exempt issuance fell 8% to $41.164 billion in 633 points from $44.741 billion in 749 points a 12 months in the past. Taxable issuance dropped 46.1% to $1.956 billion in 53 points from $3.627 billion in 68 points in 2024. AMT issuance was $1.475 billion, up simply 0.3% from $1.471 billion in 2024.
New-money issuance fell 18.9% to $29.689 billion from $36.621 billion, whereas refundings have been down 42.5% to $4.781 billion from $8.308 billion.
Income bond issuance dropped 15.5% to $28.17 billion from $33.331 billion in September 2024, and basic obligation bond gross sales ticked down 0.5% to $16.425 billion from $16.508 billion in 2024.
Negotiated deal quantity was down 5.5% to $37.111 billion from $39.292 billion a 12 months prior. Aggressive gross sales fell 17% to $7.372 billion from $8.877 billion in 2024.
Bond insurance coverage decreased 32.4% to $2.129 billion from $3.151 billion.
Financial institution-qualified issuance ticked up 1.2% to $810.4 million in 184 offers from $800.7 million in 202 offers a 12 months prior.
California claimed the highest spot year-to-date amongst states.
Issuers within the Golden State accounted for $63.197 billion, up 11.5% year-over-year. Texas was second with $62.242 billion, up 11.2%. New York was third with $47.894 billion, up 10.2%, adopted by Florida in fourth with $18.796 billion, down 16.1%, and Wisconsin in fifth with $14.952 billion, a 73.1% improve from 2024.
Rounding out the highest 10: Massachusetts with $14.266 billion, up 17.1%; Pennsylvania with $12.897 billion, up 32.2%; Illinois with $11.746 billion, up 0.8% Washington with $11.331 billion, up 8.5%; and Colorado with $10.416 billion, up 26.5%.
